ANALYSIS - Pakistan market on brink of transformation
The Pakistan telecoms market is poised for a period of unprecedented transformation as the launch of 3G and 4G services converge with a blossoming trade relationship between Pakistan and China.
Following severe delays amid legal challenges and allegations of corruption, Pakistan finally auctioned 3G and 4G licences in April of last year. Since then, an estimated 10 million subscribers have adopted next-generation mobile services.
The proliferation of smartphone and broadband penetration in Pakistan is expected to have a tremendous effect on the country’s socio-economic indicators. The Pakistan Telecommunications Authority (PTA), for instance, predicts that revenues from the Pakistan mobile market will grow from $3.9 billion per year to $17 billion per year by 2025.
First, however, a period of consolidation is expected to occur in the Pakistan telecoms market. The market is divided into 14 regions, and small to medium operators with licences in only a few of these regions are now facing a serious threat from 3G and 4G operators.
“Consolidation is seen as the immediate next step where nationwide data and internet networks will acquire smaller players operating in specific regions,” observed Muhammed Rashid Shafi, SVP and chief strategy officer at Multinet.
As competition heats up between the country’s four mobile operators, it is the smaller operators’ subscribers that will make them an attractive proposition. “These transitions will merely be a customer buy-out as the small regional networks will not have any value to the larger players,” said Shafi.
Reducing price points for new 3G and 4G services remains a critical hurdle to mass smartphone adoption in Pakistan. A major infrastructure rollout is presently underway in Pakistan to support the migration to 3G and 4G networks.
For example, Zong, which secured both 3G and 4G licences last year, was reported to have plans to invest over $1 billion in infrastructure in Pakistan, with the aim of deploying full 3G/4G services in the major Pakistan cities, such as Lahore, Islamabad and Karachi over the next three to four years.
Shafi views sharing network infrastructure as crucial to the advancement of the market. In particular, he sees an opportunity for mobile tower companies to support the migration to 3G and 4G, helping to reduce operational costs for mobile operators and ultimately bring down prices for consumers.
“The industry is seeing more mobile operators contemplate tower sharing as they aim to reduce hefty backend costs,” he said. “But in light of severe market competition, this arrangement might now always work in the long run. This has presented a great opportunity for mobile tower businesses which can offer mobile operators’ substantial costs savings.”
2015 has been dubbed the China-Pakistan year of friendship as the two countries aim to further cement ties.
At the very top of their agenda is the construction of the China-Pakistan Economic Corridor (CPEC).
By linking the Gwadar Port in southwestern Pakistan via the Karakorum Highway with Xinjiang in western China, the economic corridor is viewed as instrumental in promoting trade between the countries and the wider region.
Gas and oil pipelines, railways, roads and fibre optic networks will be established along the route, as the countries aim to promote cooperation in sectors such as ICT, energy and agriculture. The Chinese governments and banks are reported to have pledged as much as $45.6 billion in energy and infrastructure projects in Pakistan over the next six years.
The project aims at positioning Pakistan as a gateway for China to the Middle East, Africa and Europe. It has important implications too for the broader telecoms market, opening up new potential terrestrial routes through Pakistan and Central Asia.
“The low latency route across Pakistan will be a source of efficient access to the Western world for China and a derivative of substantial growth for Pakistan’s ICT market. China’s focus on African markets will also be supported by this transit,” said Shafi.
The low latency offered by terrestrial routes could offer a major alternative for traffic between Asia and Europe: “The arrival of these terrestrial routes may have a serious impact on the worth of inter and intra-continental submarine networks,” added Shafi.
Under its ‘Vision 2025’ plan, the government of Pakistan has put together a policy framework designed to encourage Foreign Direct Investment (FDI). “Acknowledging the country’s geographic significance, the PTA is actively encouraging licenced operators in Pakistan to pursue terrestrial expansions with neighbouring countries,” said Shafi.
The scene is therefore set for the country’s telecoms market to shine on both the domestic and international stage.